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2004-1: In the Matter of Eisland 21st Century, Friends of June Eisland, and Citizens for Eisland

June 08, 2004

June Eisland was a candidate for Bronx borough president in the 2001 primary elections. She participated in the New York City Campaign Finance Program (the "Program") in connection with her candidacy, and received $316,548 in public funds. Ms. Eisland's final audit report indicated that the campaign must return $142,306 in unspent public funds. The Eisland campaign has submitted a Rule 5-02(a) petition challenging this finding.1

The campaign certified a committee for the 2001 elections, Friends of June Eisland ("Committee A"), in which approximately $217,000 in surplus funds from a previous election were present.2 Committee A, after certifying for the 2001 elections, transferred $130,000 of those surplus funds out of Committee A to Citizens for Eisland ("Committee B"), a committee not then certified as active in the 2001 elections, for use in an unidentified post-2001 election. Committee B subsequently certified for the 2001 elections. The approximately $87,000 not transferred to Committee B was spent on the 2001 elections by committees certified for the 2001 elections by the Eisland campaign. The campaign argues that Committee B, while certified, did not engage in any activity for the 2001 elections, and therefore any funds remaining in Committee B are not subject to the obligation to return unspent funds.

The transfer out from Committee A to Committee B ordinarily would have resulted in a deduction of public funds pursuant to Rule 5-01(n), which calls for deductions in potential public funds when transfers are made from committees certified in the Program to other political committees. Rule 5-01(n) is intended to prevent candidates participating in the Program from subsidizing with public funds any political activities other than those of their own election campaigns.3 When candidates make certain disbursements itemized in the rule, including payments for past debt and "parking" of funds in other political committees for use in later elections, the rule provides that the amount of public funds the candidate is otherwise eligible to receive is commensurately reduced. In this way, the rule prevents candidates from using public funds to subsidize these activities. Otherwise, the public funds candidates receive could finance candidates in a manner that would leave the candidates with excess funds that can be used for purposes other than the candidates' election to office under the Program. Public funds are not intended for this purpose, and should not subsidize such activities.

The rule's purpose is similar to that of Administrative Code §3-710(2)(c), which requires candidates to return all unspent funds to the Board, up to the amount of public funds received. This obligation is designed to keep the costs of the Program to a minimum and to prevent candidates from building up war chests at public expense or subsidizing future activities with public funds. For example, a candidate who receives $60,000 in contributions, receives $10,000 in public funds, and spends $55,000, has $15,000 in funds left over following the election. The $10,000 in public funds contributes to the $15,000 surplus, and therefore if $10,000 is not required to be returned to the Board, taxpayer dollars will be subsidizing whatever future expenditures the candidate makes with the money left over.

To avoid a public funds deduction under Rule 5-01(n), the Eisland campaign certified Committee B for the 2001 elections, thus bringing the transferred funds within the jurisdiction of the Program (including an explicit obligation in the certification to return unspent public funds to the Board). Had the campaign not certified Committee B for the 2001 elections, and had a deduction therefore been applied pursuant to Rule 5-01(n), the campaign would not have received any public funds for the 2001 elections.4

On the amended form certifying Committee B for the 2001 elections, the campaign noted that it took the action "under protest." The filing of the amendment to the certification on its face has binding legal effect, however. There is no provision in the law or in the certification for a campaign to accept the benefits of the certification - including the opportunity to receive public funds - but to avoid its obligations. Therefore, the remaining unspent funds in Committee B are subject to the full range of Program requirements, including the obligation to return unspent funds to the Board.5 This remains the case notwithstanding the level of activity engaged in by Committee B.6

The petition is denied.

ENDNOTES

1 Rule 5-02(a) provides that "[a]fter the Board determines that a participant is ineligible for public funds, matchable contribution claims are invalid, or public funds must be repaid, the participant, within 30 days of such determination, may submit to the Board a written petition for review of the determination including a request to appear before the Board concerning the subject of such petition. To the extent practicable, the Board shall make a determination on such petition within 30 days of receipt of the written petition, or within 10 business days of receipt if the petition is received less than 30 days before a covered election. Upon such determination, the Board shall issue written notice to the petitioner of the Board's determination, including the reason(s) for the determination."

2 This fact pattern involves two similar terms - surplus funds and unspent funds. Surplus funds are funds brought into the 2001 elections from a prior election; unspent funds are funds left over after the end of the 2001 elections.

3 Rule 5-01(n), as in effect for the 2001 elections, provides that "[t]he following will be presumed to consist entirely of contributions claimed to be matchable: (1) transfers and other disbursements from a political committee that is involved in an election in which the candidate is currently a participant to a political committee that is not involved in that election.. An amount equal to the amount of public funds the participant is otherwise eligible to receive for such matchable contribution claims shall be deducted from the public funds paid to the participant." (Emph. added).

4 In the case of the Eisland campaign, the Rule 5-01(n) deduction would have resulted in denial of $520,000 in public funds (four times the $130,000 transferred to Committee B) - well in excess of the $316,548 in public funds received.

5 The campaign also argues that the entire $217,000 in surplus funds brought into the campaign from a prior election is somehow not subject to Program requirements, including the obligation pursuant to Administrative Code §3-710(2)(c) to pay back unspent funds to the City (up to the amount of public funds received). Surplus funds, if remaining at the end of an election, however, are unspent funds that must be returned, up to the amount of public funds received, whether these funds reside in Committee A or in Committee B, all of which were available for use in the 2001 elections. See Administrative Code§3-710(2)(c), Rules 1-02 (definitions of "receipt," "other receipt," and "unspent campaign funds"), 1-07, 5-03(e); Advisory Opinion No. 1997-6 (June 24, 1997). Cf. Administrative Code §3-712; Advisory Opinions Nos. 1993-2 (February 17, 1993),1997-9 (September 10, 1997), 1998-1 (May 7, 1998), 2000-7 (November 16, 2000), 2003-1 (February 11, 2003).

6 Otherwise, a campaign could certify multiple committees for an election, spend funds in some committees, as well as public funds received, hold surplus funds from past elections or other funds in reserve in other certified committees, and keep open the option to spend the reserve funds. Then, if because the campaign received public funds it were to determine that the reserve funds were not necessary, it could save them for future activities. By definition, the campaign would in this way be subsidizing future activities with public funds, precisely the activity the obligation to return unspent public funds is meant to prevent.